China fears wipe quarter of a trillion euros off Europe's blue-chips

LONDON, Aug 24 (Reuters) - European stocks slumped on Monday
after a rout in Chinese markets, wiping hundreds of billions of
euros off leading shares and sending one benchmark index to a
seven-month low.

The index sank to its lowest level since January, having
lost over a trillion euros in market value since the start of
the month as China's devaluation of the yuan stoked fears of
global economic deflation.

Chinese stocks plunged more than 8 percent on Monday, in
their biggest one-day loss since the height of the global
financial crisis in 2007 after Beijing held back expected policy
support at the weekend following last week's 11-percent slide.

"The events in China are clearly serious and demonstrate
that the development model there is struggling to maintain
growth," Taube Hodson Stonex Partners fund manager, Mark Evans,
said.

VOLATILITY RISES

The STOXX 600 Basic Resources Index, whose
constituents are mostly mining stocks, and the energy sector
fell 5.9 percent and 4.2 percent respectively, as
commodities slumped to multi-year lows, China being one of the
world's biggest users of metals and oil.

Shares in banks and asset managers also fell
sharply, while the Euro STOXX Volatility Index rose 4.8
points to its highest level since October 2014 - more evidence
of investor unease.

Nevertheless, strategists at JP Morgan Cazenove and Taube
Hodson Stonex's Evans said that the sell-off may have been
overdone.

"Momentum may carry developed markets lower - the U.S. in
particular has risen so strongly and to such a high valuation
that a correction was due," Evans said.

"European markets have not re-rated to anything like the
same extent and remain attractively valued in our view - though
they too may sag a bit further."

However, strategists at Societe Generale warned that their
basket of European stocks with strong business ties to China,
which includes carmakers and luxury goods companies, might come
under more selling pressure in the near-term.

($1 = 0.8705 euros)

Today's European research round-up
(Additional reporting by Sudip Kar-Gupta; Editing by Louise
Ireland)